Certificate of Deposit (CDs)

Learn all about various types of certificates of deposit, how they work and how they potentially fit into your savings and investment planning. Browse Investopedia’s expert-written library to learn more.

Frequently Asked Questions
  • Can you build credit with CDs?

    CDs, along with other types of deposit products, do not build credit.  Only borrowing money through some type of loan from a financial services lender that reports to credit bureaus, like with a car loan, personal loan or credit card, can build a credit history.

  • Are CDs different from U.S. savings bonds?

    Yes, CDs are different from U.S. savings bonds in that CDs are a deposit account that have a fixed term held with commercial banks and U.S. savings bonds are debt obligations of the United States federal government. U.S. savings bonds also offer fixed terms that pay interest at maturity but provide longer term options compared to traditional CDs.

  • How can an individual invest with certificates of deposit?

    Investable funds can be deposited in certificate of deposit instruments of various terms with commercial banks, where they will earn fixed or variable interest that is payable at maturity.

  • Which is a better savings option - CDs or Money Market Savings?

    Certificates of deposit typically pay higher interest than money market savings accounts due to the fact that they are less liquid and involve a penalty for early withdrawal. Money market savings accounts allow for limited withdrawals but do not have a maturity date or early withdrawal penalty involved. The better option depends on whether yield maximization or flexibility is more important to your financial needs.

Key Terms

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Certificates of deposit might not seem like a good place to keep your money when interest rates are low, but they do offer security and stability.
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